S&P says region’s default rose in July

NEW YORK—On the heels of Belize announcing a default in its repayment of its external debt, a major credit rating agency says that the Caribbean’s default rose in July as governments around the world incorporate policy responses to avert a repeat of the 2008 recession. The Wall Street-based Standard & Poor’s Rating Services said that the speculative-grade default rate in Latin America and the Caribbean has edged up to an estimated 1.97 per cent, as of July 31, after “bottoming” at 0.52 per cent in July.

“During the financial crisis of 2009, the speculative-grade corporate default rate in Latin America and the Caribbean increased sharply, but it was significantly lower than the global default rate and less than half the US default rate,” said Diane Vazza, head of Standard & Poor’s Global Fixed Income Research. In an article, titled Emerging Markets Credit Metrics: Defaults Increase In Latin America And The Caribbean As The Global Economy Slows, Vazza said the emerging markets speculative-grade default rate peaked at 7.25 per cent in October 2009 before declining steadily and bottoming at 0.52 per cent in July 2011.

She said since then it has been “creeping up” and that so far this year, 14 entities have defaulted in the emerging markets, including seven from Latin America and the Caribbean. Vazza said Standard & Poor’s estimated 12-month trailing speculative- grade default rate for the emerging markets as of July 31 is 1.97 percent.

“We believe that the overall economic performance of the Latin America and the Caribbean region during the recent global economic downturn will largely depend on governments’ policy responses. “We also believe that strong domestic consumer demand will provide the necessary cushion against external risks,” she added. Vazza said the European Economic and Monetary Union (Euro Zone) crisis and the slowing growth in emerging economies, such as China and India, continue to pressure global growth.

A statement from the Office of Prime Minister Dean Barrow earlier this week said that the next interest payment of US$46 million on Belize’s accumulated US$544 million foreign debt, referred to as the “super bond” is due on August 20. The payment would have been the country’s first under the interest payment plan on the US dollar Step Up Bonds due in 2029.

CMC